At the Assembly’s meeting Wednesday, lawmakers focused on a proposed amendment to 1997’s Corporate Income Tax Law that would cut corporate income taxes from 28 – 25 percent.

In a report released at the meeting, Finance Minister Vu Van Ninh said the state coffers would lose VND5 trillion (US$310 million) per year on the tax cut.

But Ninh also said the loss could be worth its weight in economic development by allowing companies in Vietnam to become more competitive.

The NA chairman of the Financial and Budgetary Committee Phung Quoc Hien said the tax cut worried him as several regional countries still applied corporate tax rates of over 28 percent.

Many experts were also convinced that high corporate taxes would not impede foreign investment, Hien said.

Deputy Nguyen Van Hien from the northern port city of Hai Phong blamed superfluous formalities, not high corporate taxes, for deterring foreign investors from Vietnam.

But a majority of lawmakers at the meeting shrugged off worries that the tax reduction would hurt tax revenues, arguing that the increasing number of business openings would offset the decrease.

The recent general trend in Asia has been to reduce corporate taxes to attract foreign investors.

Singapore recently lowered its corporate tax from 20 percent to 19 percent while China gave corporations an 8 percent break, from 33 – 25 percent.

Deputy Phuong Huu Viet from the northern province of Bac Ninh said similar concerns had arisen when the government reduced the corporate tax from 32 percent to 28 percent years ago.

But in fact, the government’s tax revenues had not decreased after the cut, he said.

Viet even proposed lowering the rate to 20 or 22 percent.

Deputies also slammed a regulation that would prevent businesses from enjoying tax deductions on workers’ perks if they paid employees above regulated maximums on benefits such as healthcare, insurance and food allowances.

Deputy Dang Ngoc Tung of Ho Chi Minh City said such a restraint would only hurt the workers.

Nguyen Huy Can, also from HCMC, agreed, saying 70 percent of HCMC-based firms were paying above regulations for workers’ benefits.

Deputy Nguyen Thi Nguyet Huong of Hanoi suggested a tax deduction for charity spending be implemented, but Hanoi deputy Pham Thi Loan warned that a tax deduction on charity activities must be acknowledged by the beneficiaries and the Fatherland Front to prevent money-laundering.

At the session, deputies also discussed proposed real estate and valued-added taxes.

Source: Thanhnien